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Japan Lags on Socially Responsible Business Investment

SNA (Tokyo) — In recent years the rise of Environmental, Social and Corporate Governance (ESG) investing has created powerful new incentives to compel companies to make meaningful changes to how they do business. ESG investing makes loans available based on the sustainability of business activities, not simply short-term profitability.

According to Junko Edahiro, chief executive of Japan for Sustainability, an advocacy group, “At present about 30% of the global investment can be categorized as ESG investment. In Europe, the percentage goes to 60%; in the United States, 18%; but in Japan until last year, almost 1%. It’s very low.”

But there’s also some good news. Within the last year, several companies have restructured to become eligible for ESG investments, fueled by a 1 trillion yen (about US$9.2 billion) infusion from Japan’s largest pension fund.

The first of these companies was Ricoh, followed by Sekisui House, and then by the Japan Environmental Storage & Safety Corporation. These corporations may be motivated by the money that is being put on offer, but the net result is positive.

Sustainable development goals, because they are a binding platform, could be one way that corporate interests could be compelled to support sustainability efforts at the local level. But for the time being, there is not much coordination between Japanese corporations and communities.